Tax extenders legislation recently signed into law by President Obama includes a provision requiring the IRS to establish a voluntary certification program for professional employer organizations (“PEO”). The legislation allows PEOs to collect and remit employment taxes for their clients, and it gives the IRS 6 months to set up the program.
Some IRS officials question the reasonableness of the 6 month deadline, citing the time consuming nature of establishing such a program coupled with the Service’s strained budget. However, proponents of the legislation argue that the IRS should be prepared to timely implement the program as presidential budget requests have included this program for years.
To receive certification under the program, a PEO has to pay a yearly fee of up to $1,000 and meet quarterly and annual reporting obligations. The PEO also must post bond and obtain financial statements approved by a CPA. A PEO that meets all of the requirements will have sole responsibility for collecting and remitting employment taxes for employees.